We use PDSEs in LNKLST just fine ... both SMS and non-SMS managed. The 
restriction, as pointed out by Tom Marchant,  is for LPA since it is built 
prior to PDSE support being available during the IPL process. 

We do space allocation for our LNKLST PDSE datasets (non-IPL volume resident) 
at triple the size. That way there is plenty of empty space in the PDSE for 
copying (2 times) newer versions of all the members into the data set prior the 
the older "space" being reclaimed for reuse.   

For replacing a PDS vs a PDSE in LNKLST, see slides 38 & 39 in the Share 
presentation at:
      
http://share.confex.com/data/handout/share/126/Session_18732_handout_9063_0.pdf 

We successfully used those methods when we used TDMF a couple of years ago to 
migrate every single z/OS DASD address to newer technology.

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